Trading, Accounts & Prohibited ActsQuestion 198 of 398
Which of the following best distinguishes a securities exchange from the OTC market?
a.An exchange trades only bonds, while the OTC market trades only stocks
b.An exchange is unregulated, while the OTC market is regulated by FINRA
c.An exchange never uses market makers of any kind
d.An exchange is a centralized auction market, while the OTC market is a decentralized negotiated market
Explanation
An exchange operates as a centralized auction market where competing bids and offers meet, whereas the OTC market is a decentralized, dealer-negotiated market. Both are regulated, and both trade a range of securities.
Law Reference: Securities Exchange Act of 1934Practice all 398 questions free — no signup required.
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